Top Biotechs With Upside Ahead of Earnings (GILD, AMLN, ARIA, INCY, JAZZ, DNDN, HGSI, ILMN, AMGN, CELG, BIIB, BMRN, LIFE, REGN, AMLN, CBST, ONXX, THRX, VPHM)
Earnings season is afoot and we wanted to see how the analysts are ranking the top biotech stocks before these companies begin their earnings reports. We pulled the top biotech and biohealth related stocks which have market caps of $1 billion and higher and we broke these out into three separate groups by size. The large-cap biotechs are ranked in descending order by size. The stocks under $10 billion in market cap and then under $3 billion were broken out in alphabetical order.
We have compiled some color on selected names, but we also listed the current trading prices, the implied price targets from Thomson Reuters, gave multiples of earnings estimates (from Thomson Reuters) for the forward year (2012 in most cases), showed the trading history and listed a price-to-book ratio. We did not take any merger news into consideration so that we could just show an as-is model here.
Of the large cap stocks in biotech, Gilead Sciences, Inc. (NASDAQ: GILD) was the leader. Several other standouts in the biotechs under $10 billion with a high degree of expected upside were as follows: Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA), Incyte Corporation (NASDAQ: INCY), and Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ). Other biotechs such as Dendreon Corporation (NASDAQ: DNDN), Human Genome Sciences, Inc. (NASDAQ: HGSI) , and Illumina, Inc. (NASDAQ: ILMN) also screen out as those with the most upside, but that is because of huge share price drops of late.
THE $10 BILLION AND OVER IN MARKET CAP
Amgen Inc. (NASDAQ: AMGN) is the largest of the independent biotechs and it remains stuck like Chuck. At $56.71, the consensus target is $64.85 and the stock trades at a mere 10-times 2012 earnings estimates. Its 52-week range is $47.66 to $61.53 and its market cap is north of $52 billion. It is also worth about 2-times book value. Implied Upside: 14.3%.
Gilead Sciences, Inc. (NASDAQ: GILD) trades around $40.37 and estimates have a consensus price target of $47.96. This forward earnings multiple is only about 9.0 now. The 52-week range is $35.28 to $43.49, the market cap is $31.1 billion and the company trades at more than 5-times book value. Implied Upside: 18.5%.
Celgene Corporation (NASDAQ: CELG) trades at $64.97 and the consensus price target is about $71.86. This one is more expensive than many of the established biotech players at more than 15-times forward earnings. Celgene’s 52-week range is $48.92 to $67.01, its market cap is $29.8 billion, and it trades at nearly 5-times book value. Implied Upside: 9.8%.
Biogen Idec Inc. (NASDAQ: BIIB) remains the big-cap recovery stock of biotech. At $102.00, its consensus price target is $110.36, and it trades at close to 16-times forward earnings. The market cap is about $24.7 billion, the 52-week range is $57.58 to $109.63, and the company is worth about 4-times book value. Implied Upside: 8.5%.
UNDER $10 BILLION IN MARKET CAP
BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) trades at $33.05 and analysts have a consensus price target of $36.25. Unfortunately, this one is expected to lose money this year at -$0.31 EPS and next year’s earnings are expected to be -$0.04. The 52-week range is $21.70 to $34.50, its market cap is $3.7 billion, and it is listed as trading at close to 5.0-times book value. Implied Upside: 9.6%.
Illumina, Inc. (NASDAQ: ILMN) trades around $26.56 and the consensus price target is about $42.90. The company trades at more than 18-times next year’s earnings estimates, its 52-week range is $25.57 to $79.40, its market cap is about $3.3 billion, and it trades at almost 2.9-times its book value. Implied Upside: 62%.
Life Technologies Corporation (NASDAQ: LIFE) may be difficult to compare after a huge run higher followed by a recent tank in the share price. It is also on the equipment side. Shares are back down around $37.24 and the consensus analyst price target is now down to $52.66. The company now trades at barely 9-times forward earnings, if you trust the “E” in that P/E ratio. LIfe’s 52-week trading range is $35.30 to $57.25, its market cap is about $6.7 billion, and the stock is worth about 1.5-times the stated book value. Implied Upside: 41%.
Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) trades around $60.00 after a large drop due to a $400 million convertible note offering. The consensus price target is about $66.14. The company is also expected to lose as much as $2.00 per share in 2012. It has a 52-week trading range of $24.29 to $79.90, its market cap is $5.5 billion, and it trades at more than 12-times its previously stated book value. Implied Upside: 10.1%.
UNDER $3 BILLION IN MARKET CAP
Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN) trades around $10.14 and the consensus price target from analysts is $13.44. The 52-week trading range is $8.03 to $21.23, its market cap is about $1.5 billion, and it is worth about 4.6-times book value. Implied Upside: 32.5%.
ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) trades around $10.25 and the consensus price target is $15.44. The company is expected to have losses this year and next. Its 52-week trading range is $3.51 to $13.50, its market cap is $1.35 billion, and the book value at the last report was barely positive. Implied Upside: 50%.
Cubist Pharmaceuticals, Inc. (NASDAQ: CBST) was another big winner earlier in the year and its shares are now at $36.71 versus a consensus price target of $40.82. This used to be a value stock but now trades at closer to 22-times next year’s earnings estimates. The 52-week range is $20.81 to $39.29, the market cap is $2.24 billion, and it trades at just over 3-times book value. We once considered this a biotech buyout target, but that is in the past. Implied Upside: 11%.
Dendreon Corporation (NASDAQ: DNDN) shares are now around $9.40 and the consensus analyst target has come down all the way to $13.72. The company has no forward P/E ratio now as it is expected to lose money. The 52-week range is $7.81 to $43.96, its market cap is down to $1.4 billion, and it is listed as being worth more than 3-times its own stated book value. Implied Upside: 45%. Shares have fallen far from grace, so analyst targets and the ratios may all look a bit off. We also cannot count on estimates since the analysts and the company got this one so wrong on the end demand for Provenge. Now we have to hope that Provenge can have many more expanded uses outside of prostate cancer or this is a hard one to follow. What is odd is that Provenge is being tested for other uses and those could reignite interest if more promising data ever comes out. If not, let’s just say this was a painful lesson in biotech.
Human Genome Sciences, Inc. (NASDAQ: HGSI) is now up around $12.81 after buyout rumors and the consensus target is still listed as being roughly $24.00. The company trades at about 24-times next year’s earnings estimates, its 52-week range is $10.40 to $30.15, its market cap is now under $2.5 billion, and it is worth about 5.3-times its book value. Implied Upside: 87%.
Incyte Corporation (NASDAQ: INCY) trades around $14.04 and anlaysts have a consensus price target of $22.92 on the stock. It is expected to lose money this year and next year and the 52-week range is $12.58 to $21.15. While there is a $1.77 billion market cap, Incyte’s is listed as having a negative book value as laibilities exceed assets. Implied Upside: 63%.
Jazz Pharmaceuticals, Inc. (NASDAQ: JAZZ) trades around $40.00 after a sharp drop due to an FDA warning. That may make the figures a bit distorted. The consensus price target is $54.00 but that does not include the FDA impact. Jazz trades at only about 10.6-times next year’s earnings estimates. Its 52-week range is $10.51 to $47.88, its market cap is almost $1.7 billion, and the company trades at close to 16-times an implied book value. Implied Upside: 35%.
ONYX Pharmaceuticals, Inc. (NASDAQ: ONXX) trades at close to $34.50 and the consensus target is closer to $44.60. It is one which is also expected to lose money this year and next year. The 52-week trading range is $26.17 to $45.90, its market cap is $2.2 billion, and the stock trades at close to 3.5-times its book value. Implied Upside: 29.2%.
Seattle Genetics, Inc. (NASDAQ: SGEN) trades around $20.50, above the $19.15 consensus analyst price target. The company is expected to lose money in 2011 and 2012. With a 52-week range of $12.29 to $22.37, its market cap is $2.35 billion, and it trades at close to 9-times book value. Implied Upside: NEGATIVE by -6.5%.
Theravance, Inc. (NASDAQ: THRX) trades around $21.40 and analysts have a price target of $27.43 for the stock. The company is another one expected to lose money this year and next. The 52-week range is $16.44 to $28.95, the market cap is $1.8 billion, and it is another one that trades with a negative tangible asset level. Implied Upside: 28%.
ViroPharma Incorporated (NASDAQ: VPHM) trades around $19.00 and the consensus price target is $23.54. Due to an expected drop in royalties, its earnings are expected to be halved in 2012 versus 2011. Its 52-week range is $14.39 to $22.16, its market cap is about $1.45 billion, and it trades at about 1.5-times its stated book value with a large portion of assets as intangible assets. How this one looks on a standalone basis through time is a guess. Implied Upside: 24%.
On all of these implied upsides, please be sure to do your own research. We encourage our readers to challenge Wall Street analysts rather than merely following them blindly. Many cases have been there before were the analysts were just dead wrong. We also cannot help but notice how the biotech sector often has two very same observations based upon the exact same set of data, yet one analyst will say “Buy” and the other will say “Sell.”
JON C. OGG
It seems that if there is one segment that everyone agrees will continue to see consolidation, it is the biotech, drug, and specialty pharmaceutical sector. A report this week from UBS has highlighted several possible deals that it could imagine from its universe of analysts and there were four possible deals in biotech and pharma that were touted and which we think were worth mentioning.
The companies covered as possible targets were Incyte Corporation (NASDAQ: INCY), Celgene Corporation (NASDAQ: CELG), Cadence Pharmaceuticals Inc. (NASDAQ: CADX), and Salix Pharmaceuticals Ltd. (NASDAQ: SLXP). We have sort of handicapped each scenario with our own outlook and shown how these compare to an overall analyst consensus.
Incyte Corporation (NASDAQ: INCY) is called a biotech takeover target as it is partnered with Eli Lilly Co. (NYSE: LLY), a larger company which has shown a past appetite for making deals with partners. On LLY-104, Lilly owes Incyte $616 million in remaining milestones and which it splits operating profits equally. The firm believes that Lilly could acquire Incyte in order to consolidate economics on a key product in the pipeline. With a typical premium of about 50%, that would imply a price of at least $30.00 per share based upon a $20 price target. If you include the current pipeline and technology platform, the belief is that $30.00 would be a floor. Another Incyte partnership is with Novartis (NYSE: NVS) on ruxolitinib, but the outlook is less dependent on that product and partnership. At $18.58, the Thomson Reuters consensus price target is $22.57 and the 52-week range is $10.21 to $21.15.
Both Incyte Corporation (NASDAQ: INCY) and Celgene Corporation (NASDAQ: CELG) are rated Buy at UBS.
Celgene Corporation (NASDAQ: CELG) is one biotech we do not really agree with UBS on, but only because we imagine it being an acquirer to grow its enterprise. After all, its market cap is almost $27.5 billion. Still, UBS noted that Celgene is trading below an estimated intrinsic value if the company achieves success on its pipeline and receives its milestones. The idea here is a Big Pharma buyer somewhere under $80.00 per share with a value of $40 billion or so. UBS did at least note that the absolute likelihood of a deal happening here is not very high but it is more attractive compared to other large biotechs when considering patent terms, growth, and its strategic positioning. At $59.39, Thomson Reuters has a consensus price target of $66.91 and the 52-week trading range is $48.02 to $63.46.
Cadence Pharmaceuticals Inc. (NASDAQ: CADX) was given a very short write-up in the specialty pharmaceutical sector. It was noted as being that Hospira Inc. (NYSE: HSP) could drive significant SG&A synergies by leveraging its own sales force. UBS also only has a neutral rating, but this is in that sweet spot with a market cap of $585 million. We would note that the consensus Thomson Reuters data shows revenues growing from about $21.5 million in 2011 to just over $110 million in 2012. With shares around $9.22 today, the 52-week range is $6.41 to $10.00 and Thomson Reuters has a price target of $10.14 from its analyst pool.
Salix Pharmaceuticals Ltd. (NASDAQ: SLXP) is also only given a Neutral rating at UBS, but its $2.24 billion market cap is one that UBS could be driven higher on synergies by leveraging its sales force to juice sales in Xifaxan. It is hard to get excited about the deal size projected too with a likely value of $2.5 to $3.0 billion.
As a reminder, just because M&A deals are dreamed about does not mean that a deal is imminent or even in the works. It is our take that some of the broad list of over 40 companies throughout many sectors not tied to healthcare or biohealth may have more attractive candidates for M&A. That is what makes a market.
JON C. OGG
Clovis Oncology, Inc. has filed for an initial public offering. The company plans to list on the NASDAQ Global Market under the stock symbol “CLVS.” Financial terms were not disclosed, but Clovis listed that the proposed maximum to be sold in shares is up to $149,500,000.00.
Book-runners are listed as J.P. Morgan and Credit Suisse; and the co-manager is Leerink Swann.
Clovis is a biopharmaceutical outfit focused on acquiring, developing and commercializing innovative anti-cancer agents in the United States, Europe and additional international markets. The target arena are development programs in subsets of cancer populations.
The company currently is developing three product candidates where it holds global marketing rights:
- CO-101, a lipid-conjugated form of the anti-cancer drug gemcitabine, which is in a pivotal study in a specific patient population for the treatment of metastatic pancreatic cancer;
- CO-1686, an orally available, small molecule epidermal growth factor receptor, or EGFR, covalent inhibitor that is currently in preclinical development for the treatment of non-small cell lung cancer, or NSCLC, in patients with activating EGFR mutations, including the initial activating mutations, as well as the primary resistance mutation, T790M;
- and CO-338, an orally available, small molecule poly (ADP-ribose) polymerase, or PARP, inhibitor being developed for various solid tumors that is currently in a Phase I clinical trial.
The company was founded in April 2009 by former executives of Pharmion Corporation, which developed and commercialized oncology products and which was ultimately acquired by Celgene Corporation (NASDAQ: CELG) in 2008.
Pfizer, Inc. (NYSE: PFE) was listed as a beneficial owner by name, but no actual shares were mentioned.
The company’s full IPO prospectus filing is available here.
JON C. OGG
When you hear about the oncology conference of the American Society of Clinical Oncology annual meeting in Chicago each year, you are probably drawn to what may be the next Genentech. This is the conference that if good cancer and oncology study data can come out then it is likely to be presented here.
We have broken down some of the key ASCO news bits, but these are in very abbreviated summaries in order to keep it from going on and on. Antigenics Inc. (NASDAQ: AGEN), ARIAD Pharmaceuticals Inc. (NASDAQ: ARIA), BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX), Celgene Corporation (NASDAQ: CELG), Genomic Health Inc. (NASDAQ: GHDX), Geron Corporation (NASDAQ: GERN), Incyte Corporation (NASDAQ: INCY), Oxigene Inc. (NASDAQ: OXGN), RXi Pharmaceuticals Corporation (NASDAQ: RXII), Seattle Genetics Inc. (NASDAQ: SGEN), Sunesis Pharmaceuticals Inc. (NASDAQ: SNSS), and Vical Incorporated (NASDAQ: VICL) are just some of the companies reacting to ASCO and oncology news this morning.
Antigenics Inc. (NASDAQ: AGEN) has disclosed data on from Phase 2 Brain Cancer Study with Prophage Series G-200 (HSPPC-96) showing improved overall survival as a vaccine in glioblastoma multiforme at ASCO. Trial results showed that 93% of the patients were alive at greater than or equal to 26 weeks after surgery and a median overall survival of 47.6 weeks. Results from pre-defined exploratory analyses showed a median progression free survival of 20 weeks. Measures of immune response post vaccination demonstrated a significant tumor-specific CD8+ T-cell response and also showed an innate immune responses as marked by a significant increase in levels of circulating NK cells. Unfortunately, shares are now in the red and down almost 5% at $0.964. Update after 4 PM EST: shares closed down 11.4% at $0.895.
ARIAD Pharmaceuticals Inc. (NASDAQ: ARIA) is higher after coming on CNBC saying it is not for sale after presenting data that its sarcoma drug with Merck reduced the risk of the disease progressing. Merck & Co. (NYSE: MRK) is its marketing partner and it plans to apply for FDA and E.U. approval this year. ARIAD shares are up 1.9% at $8.04 after the open. Update after 4 PM EST: shares closed up only 0.25% at $7.91.
BioSante Pharmaceuticals, Inc. (NASDAQ: BPAX) is more general cancer news than ASCO but important nonetheless…. The company announced the lifting of clinical hold on its GVAX prostate cancer vaccine by the FDA. Manufacturing is complete and planning for a Phase II clinical trial at the Johns Hopkins Kimmel Cancer Center is underway. Shares are up 2.6% at $3.09 after the open. Update after 4 PM EST: shares closed down 0.3% at $3.00.
Celgene Corporation (NASDAQ: CELG) is not reacting to news that Abraxane has improved the response rate in non-small cell lung cancer patients compared to the generic chemotherapy drug paclitaxel. It appears that Abraxane did not delay tumor growth or help lung cancer patients live longer in phase III study data. The company believes that increasing the rate of tumor shrinkage will be enough to get FDA approval in 2012. Shares are down $0.09 at $58.77 right after the open. Update after 4 PM EST: shares closed down 0.7% at $58.46.
Genomic Health Inc. (NASDAQ: GHDX) is supposed to be a winner on the front of personalized cancer care but we are not seeing that today. It presented 10 New studies in breast, colon and prostate cancers. The results included a second large validation study confirming the performance of the Oncotype DX colon cancer recurrence score. The goal is to make a test for biopsy specimens available in 2013. Shares are actually down 1% at $26.23 right after the open. Update after 4 PM EST: shares closed down 1.6% at $26.07.
Geron Corporation (NASDAQ: GERN) is the stem cell leader and it reported presentations at the ASCO/AACR joint session regarding Telomeres and Telomerase in Cancer are taking place today at the 2011 ASCO Annual Meeting. Shares are only up $0.01 at $4.28 right after the open. Update after 4 PM EST: shares closed down 0.9% at $4.23.
Incyte Corporation (NASDAQ: INCY) has two bits of news. It announces Ruxolitinib (INC424) showed a significant clinical benefit for Myelofibrosis patients in two Phase III studies at ASCO. The company also announced this morning that it did submit a new drug application for Ruxolitinib in Myelofibrosis to the FDA. Shares are up 4% at $17.17 right after the open. Update after 4 PM EST: shares closed up 2.3% at $16.90.
Oxigene Inc. (NASDAQ: OXGN) presented updated safety and clinical activity data from the FALCON trial, a stratified randomized, controlled Phase 2 study of ZYBRESTAT in patients with non-small cell lung cancer at ASCO. An updated analysis conducted approximately 11 months after the enrollment of the last patient in June 2010 showed that the combination regimen of ZYBRESTAT plus bevacizumab, carboplatin and paclitaxel (ZYBRESTAT Arm) was observed to be well-tolerated with no significant cumulative toxicities when compared with the control arm of the study. Shares are up 16% at $4.96, but it also regained NASDAQ compliance. Update after 4 PM EST: shares closed up 7.5% at $4.59.
RXi Pharmaceuticals Corporation (NASDAQ: RXII) is one of the larger ASCO winners so far. It showed positive NeuVaxTM Phase 2 efficacy results for the adjuvant treatment of low to intermediate HER2 expressing breast cancer. The Phase II trail did show statistically significant increase in disease free survival at 36 months versus the control group for the planned Phase 3 patient population. The new timeline is to initiate the Phase 3 trial in the first half of 2012 to accelerate this treatment for women who are not eligible for other HER2 directed therapies. Shares are up 14% at $1.495 after the open. Update after 4 PM EST: shares closed down 8.5% at $1.17.
Seattle Genetics Inc. (NASDAQ: SGEN) is marginally after presenting SGN-75 clinical data… two patients achieved a partial response, eight patients had stable disease, 11 patients had progressive disease and four patients were not evaluable for response in non-Hodgkin lymphoma patients. The every-three-week dosing schedule has been selected for further study. Shares are up 1.5% at $19.23. Update after 4 PM EST: shares closed up 2.2% at $19.37.
Sunesis Pharmaceuticals Inc. (NASDAQ: SNSS) is down after its presentation of its adaptive study design for Vosaroxin Phase 3 VALOR trial in acute myeloid leukemia. VALOR is expected to enroll 450 evaluable patients at leading sites in the U.S., Canada, Europe, Australia and New Zealand. Shares are down 12% at $2.63 after the open. Update after 4 PM EST: shares closed down 17.9% at $2.47.
Vical Incorporated (NASDAQ: VICL) was initially up 3% after the open but is now flat. The company showed reports of a positive correlation between the response and survival for completed Allovectin melanoma trials at ASCO. Update after 4 PM EST: shares closed up 0.25% at $3.87.
Unfortunately, 2011 has so far failed to yield any massive winners. Our view is that the personalized angle will probably continue to draw the most interest. Keep in mind that any large or small company comments throughout the conference can make or break a stock.
JON C. OGG
Celgene Corporation (NASDAQ: CELG) is having a rough day. There are some concerns being brought to light. This morning came a report from Zacks.com detailing Celgene as a current member of the exclusive Zacks #5 Rank List. In short, Zachs named it as one of the “Stocks to Sell Now.”
Zacks pointed out, “Celgene posted fourth quarter earnings of 65 cents per share on January 27, which came in 3% short of the average forecast. The Zacks Consensus Estimate for 2011 declined 7 cents to $3.02 per share over the past month as 6 analysts out of 11 cut back on expectations. Estimate for 2012 dipped 10 cents to $3.71 per share in a span of a week.”
Last month, the company gave a longer-term forecast for 2011 earnings of $3.30 to $3.35 EPS on $4.4 to $4.5 billion in revenues. Even after a 6% drop to $50.00 today, Celgene trades at about 15-times expected earnings and about 5.5-times revenues. Not really expensive at all, but not screaming dirt cheap either. The Thomson Reuters estimates for 2012 are currently $4.06 EPS and $5.1 billion in revenues.
Here is the good news, despite an analyst downgrade. The valuation is finally becoming fair here, something which has long been a problem for the cancer player. The 52-week trading range is $48.02 to $65.79, and shares were just at $60.00 briefly right after the start of 2011. Shares were expensive then, now they are getting more reasonable. The market value is $23.5 billion today.
The big risk is always a timing risk. Chances are that Celgene won’t suddenly get away from investors due to the current weakness. Analysts have cooled to the name in recent days and the weakness here is so close to 52-week lows that it seems more likely a fresh year low will be seen rather than not seen.
JON C. OGG
Bioheath Investor is creating some ongoing outlook pieces as 2010 ends so we have an outline of what to expect for 2011. We have already given the “Best of Big Biotech in 2010″ and now we want to focus on “The Big Biotechs With The Most Upside for 2011.” Using “Big Biotech” implies market caps of those with a market cap of $1 billion or higher. It was surprising that many of those big biotechs are actually trading much higher than their projected price targets.
Our screen generated 7 of the pack with implied upside of more than 15% for 2011. Those making the screen were Amgen Inc. (NASDAQ: AMGN), Gilead Sciences, Inc. (NASDAQ: GILD), Celgene Corporation (NASDAQ: CELG), Human Genome Sciences, Inc. (NASDAQ: HGSI), Dendreon Corporation (NASDAQ: DNDN), Incyte Corporation (NASDAQ: INCY), and Acorda Therapeutics, Inc. (NASDAQ: ACOR) made the grade for those with the most implied upside to the average analyst price targets with a one-year horizon.
We did create a brief table showing the tickers, the current price, the implied analyst consensus price target from Thomson Reuters, the implied upside to that target, and the 52-week trading range. More importantly, we gave an added breakdown on each with supporting data and color for building such an outlook.
|Stock||Current||Target||Implied Gain||52-Week Range|
|AMGN||$56.13||$65.39||16.5%||50.26 – 61.26|
|GILD||$36.54||$44.67||22.2%||31.73 – 49.50|
|CELG||$60.28||$70.48||16.9%||48.02 – 65.79|
|HGSI||$24.63||$35.17||42.8%||20.56 – 34.49|
|DNDN||$35.81||$52.73||47.2%||25.78 – 57.67|
|INCY||$16.81||$21.08||25.4%||8.50 – 17.48|
|ACOR||$27.60||$33.58||21.6%||24.99 – 40.48|
Amgen Inc. (NASDAQ: AMGN) has been range-bound for so long that we have called it a Big Pharma company masquerading as a biotech. It is THE largest of all U.S.-based biotechs out there. The 16.5% implied upside to a consensus target of $65.39 would mean a multi-year high as this one has been greatly range-bound in a $50 to $60 range. We’ll be looking forward to more data on its prostate cancer indication possibilities. The market cap here is well over $50 billion and it has so far survived its political risks and reimbursement risks from Washington D.C. What else is there really to add?
Gilead Sciences, Inc. (NASDAQ: GILD) has a high implied upside of more than 22% and it ranks among the biggest biotechs in the world with its $29.6 billion market cap. The implied target of $44.67 has already been breached before as the 52-week high is $49.50. Gilead even peaked at $55 back in 2008 before the meltdown. Its recent loss may have become InterMune’s gain.
Celgene Corporation (NASDAQ: CELG) has become harder and harder to evaluate on its valuation versus growth, but grown it has… even if shares have been range-bound. Its market cap is north of $28 billion based on REVLIMID, THALOMID, and others. If it makes that near-17% upside to $70.48, that will be a new 52-week high and will be within striking distance of the 2007 and 2008 highs.
Human Genome Sciences, Inc. (NASDAQ: HGSI) is the #2 stock of the implied upside stocks worth more than $1 billion. The implied event is the FDA review of Benlysta for lupus in March 2011 and if approved it would be the first lupus treatment in the last 50 years. While the implied upside is almost 43% to $35.17, Human Genome shares have already traded as high as $34.49 over the last year. Two recent analyst calls could not have been more opposite.
Dendreon Corporation (NASDAQ: DNDN) won the pole position as #1 with the most implied upside. Dendreon is a 2011 story as it telegraphed that its Provenge is likely to see a later in the ramp up and back-ended growth cycle as more capacity comes on line. The company is also seeking expanded Provenge manufacturing approval. While the implied upside is 47% to the $52.73 target, shares have traded north of $57.00 this year. We recently saw a very bullish outlook from a research report here.
Incyte Corporation (NASDAQ: INCY) is expected to have some 25% upside to its $21.08 consensus target, and it should be noted that it has a 52-week high of only $17.48. Thomson Reuters expects a decline in 2011 revenues and the story is still one that can go either very well or could backfire as its losses mount. Incyte’s market cap is still north of $2 billion and its cash is in excess of $400 million as of its September 30, 2010 balance sheet. Keep in mind that at the time of that balance sheet, debt and deferred liabilities already offset that cash balance. Incyte is one that could be a huge wild card ahead.
Acorda Therapeutics, Inc. (NASDAQ: ACOR) is one that is close enough to the 52-week lows that the implied upside may not be believed by many investors. The implied upside to the $33.58 target is still over 21%, but shares have come off the yearly highs by more than 30% so far in 2010. Its market cap is barely over the $1 billion line at $1.08 billion and we’d rate this another wild card for biotech investors.
As far as how these big biotech targets compare with a fresh initiation from Credit Suisse, that can be seen here. Keep your eyes out for both Human Genome Sciences and Dendreon in 2011. Those are both exponential winners and were up for review in late 2010 as they were among the field of ten-baggers with implied gains of 1,000% or more.
JON C. OGG
Top BioHealth Analyst Upgrades & Downgrades (AMGN, AZN, BAY, BIIB, CELG, EXAM, GILD, GSK, HGSI, LH, NVS, PFE, UTHR, WCRX)
We have seen many research calls from Wall Street analysts with upgrades, downgrades, and initiations this Tuesday in the world of biotech, pharmaceuticals, and biohealth. Some of the key calls we have seen are as follows:
Amgen Inc. (NASDAQ: AMGN) Started as Neutral w/ $58 target at Credit Suisse.
AstraZeneca (NYSE: AZN) Cut to Underperform at Credit Suisse.
Bayer AG (NYSE: BAY) Raised to Outperform at Credit Suisse.
Biogen Idec Inc. (NASDAQ: BIIB) Started as Neutral w/ $68 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Started as Neutral w/ $60 target at Credit Suisse.
Celgene Corporation (NASDAQ: CELG) Maintained Buy with $68 price target at BofA/ML.
Examworks Group Inc. (NASDAQ: EXAM) Started as Outperform w/ $22 target at Credit Suisse.
Gilead Sciences Inc. (NASDAQ: GILD) Started as Outperform w/ $52 target at Credit Suisse.
GlaxoSmithKline plc (NYSE: GSK) Raised to Neutral at Credit Suisse.
Human Genome Sciences Inc. (NASDAQ: HGSI) Started as Outperform w/ $31 target at Credit Suisse.
Lab Corporation of America (NYSE: LH) Started as Neutral w/ $89 target at Credit Suisse.
Novartis (NYSE: NVS) Raised to Outperform at Credit Suisse.
Pfizer Inc. (NYSE: PFE) Maintained Outperform at Credit Suisse.
United Therapeutics Corp. (NASDAQ: UTHR) Started as Neutral w/ $57 target at Credit Suisse.
Warner Chilcott plc (NASDAQ: WCRX) Reiterated Buy at BofA/ML.
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JON C. OGG
Things have changed in the last week. The mid-term elections took away the majority of the House of Representatives, and the Senate now no longer has the super-majority which could get laws passed no matter what they included. Now it seems that the tax cuts may be extended for another year or maybe two years, which could imply a permanent change ahead if the 2010 election trends remain close to the same in 2012. Quantitative easing from the FOMC is meant to drive investors into riskier assets and create a higher pricing environment to avoid deflationary pressure. Generally speaking, those riskier assets are commodities, and broader stocks tied to industrial, exports, financials, and more. But what about biotech and emerging pharma? So far, QE2, tax extension, and the reversal of ‘the new normal’ has not highlighted biotech in the slightest.
Biotech HOLDRs (NYSE: BBH) and SPDR S&P Biotech (NYSE: XBI) are classic examples of underperforming ETFs in the last week as you can see in the chart below. The Biotech HOLDRs actually fell during the rest of the market gains, while the SPDR S&P Biotech ETF significantly underperformed the PowerShares QQQ (NASDAQ: QQQQ).
A research call this last Thursday came from Goldman Sachs and it was cautious in Celgene Corporation (NASDAQ: CELG) and Gilead Sciences Inc. (NASDAQ: GILD); and the call was very cautious in Amgen Inc. (NASDAQ: AMGN) and Biogen Idec Inc. (NASDAQ: BIIB). Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) was the one that Goldman Sachs liked, and despite its large gains so far in 2010 the stock performed well after rising from about $68 early Tuesday to close the week out at $72.72.
MannKind Corp. (NASDAQ: MNKD) is one of those companies that will have nearly zero impact from Quantitative Easing nor from who is in control of the House, Senate, or White House. Alfred Mann’s inhalable insulin candidate took a hit because of fraud allegations from a terminated employee who brought up study misconduct concerns. Shares went from $6.20 on Thursday early morning to close the week out at $5.54 for roughly a 10% drop. The 52-week range is $4.76 to $11.12, and the general theme is that AFREZZA is farther and farther away from approval.
Human Genome Sciences Inc. (NASDAQ: HGSI) has lost some of its high-flyer status compared to 2009 and early 2010, and this week brought about a negative cloud on teh company even though the company itself was not at fault. The SEC charged a French research doctor with insider trading that allowed a hedge fund to dump 6 million shares after a tip that the drug Albuferon for Hepatitis C had negative test results. The problem is that the incident goes back to 2007. Human Genome shares were nearly at $27.00 at the start of the week and they closed at $25.31 versus a 52-week range of $20.56 to $34.49.
VIVUS Inc. (NASDAQ: VVUS) was started as Buy at Roth Capital this last week with a $12 price target, yet it did not hold much of the large gains from the week before. VIVUS shares rose a week earlier from $6.13 ti $7.75 after the FDA denied its Qnexa weight loss drug but after most issues seemed to be within working conditions without the need for a new round of drug trials. Shares did not close on the lows Friday, but the loss was close to 10% at $7.12 on the week. If this is approved, we have seen some research that indicates many patients will probably pay out of pocket on their own for this if insurance reimbursement rates do not cover it.
Dendreon Corporation (NASDAQ: DNDN) was another dud this week. The company’s loss was more than $79 million due to ongoing product expansion and promotion costs for PROVENGE. The drug is selling less than expected so far. The company sold $20.2 million and sales grew each month, but analysts were looking for nearly $24 million in sales. Dendreon gave sales projections of $46 to $47 million in 2010 revenue. It said it expects $350 to $400 million in revenue in 2011, but 2011 is expected to be very back-end loaded as capacity comes on line. That implies that any delay will push revenues further and further out, perhaps as more prostate cancer competition can come on the market. Analyst expectations were more like $62.6 million in 2010 and over $400 million in 2011. Shares peaked at $39.00 during the week but closed down at $35.07; its 52-week range is $25.05 to $57.67.
Most investors consider biotech and emerging pharma to be risk-based assets. These are a different sort of risk. Some of the pressure from Washington D.C. may abate, but Republicans have vowed to address some of the cost side of the equation when it comes to healthcare. If Washington can figure a way for hospitals to not charge $25 for administering an aspirin tablet or an ibuprofen pill, it seems logical that $20,000 to $90,000 treatment regimens could remain under scrutiny.
So far, biotech and emerging pharma is being discounted entirely despite the winds of change feeling a tad less abrasive.
JON C. OGG
Goldman Sachs is taking a very cautious view on many of the large biotech leaders in a new coverage call. While there is a silver lining call in one, the bulk of the research has a very cautious stance due to revenue woes that could lie ahead for the large biotechs.
Amgen Inc. (NASDAQ: AMGN) started with a “SELL” rating.
Biogen Idec Inc. (NASDAQ: BIIB) started with a “SELL” rating.
Celgene Corporation (NASDAQ: CELG) started with a “NEUTRAL” rating.
Gilead Sciences Inc. (NASDAQ: GILD) started with a “NEUTRAL” rating.
Alexion Pharmaceuticals, Inc. (NASDAQ: ALXN) is the standout stock this morning and the exception to the rule. Alexion shares were started on the CONVICTION BUY LIST and the stock is up 2% at $71.94 and close to challenging the 52-week high of $72.45.
JON C. OGG
Pharma-Biotech Major Research Alerts (TEVA, AMGN, ACOR, CELG, HGSI, BIIB, GILD, EXAS, ZGEN, DYAX, IDXX, VPHM)
Biotech and pharma research calls from Wall Street research firms have come out of the wood work this Thursday.
Teva Pharmaceutical Industries Limited (NASDAQ: TEVA) is one of our recent “Defensive Stocks for the Next Bear Market” picks based upon valuation. This morning Oppenheimer raised the rating to OUTPERFORM on hope and expectations that it will see a big boost in the second half from its Effexor sales.
STIFEL NICOLAUS started many key biotech stocks with coverage this morning:
- Amgen Inc. (NASDAQ: AMGN) and Acorda Therapeutics, Inc. (NASDAQ: ACOR) and Celgene Corporation (NASDAQ: CELG) and Human Genome Sciences Inc. (NASDAQ: HGSI) were all started with BUY ratings;
- Biogen Idec Inc. (NASDAQ: BIIB) at SELL;
- Gilead Sciences Inc. (NASDAQ: GILD) at HOLD.
EXACT Sciences Corp. (NASDAQ: EXAS), a molecular diagnostics company focused on the early detection and prevention of colorectal cancer, is soaring by 13% after being started with new coverage as a Buy rating by Jefferies ahead of next week’s presentations at the Rodman & Renshaw 12th Annual Healthcare Conference and at the Baird’s 2010 Health Care Conference.
ZymoGenetics Inc. (NASDAQ: ZGEN) was hit with a cut to Neutral at UBS, but that is because of the Bristol-Myers Squibb buyout.
Dyax Corp. (NASDAQ: DYAX) and IDEXX Laboratories, Inc. (NASDAQ: IDXX) were both started as MARKET PERFORM and ViroPharma Inc. (NASDAQ: VPHM) as OUTPERFORM at Leerink Swann.
JON C. OGG